Prevent Fraud with an Accounting Rhythm

Fraud is a reality for most businesses. It can be as small as taking home office supplies to as large as million dollar embezzlement. 23% of fraud cases involve losses greater than $1 million; on average, fraud costs $7,310 per employee per year.

Most of the risk will be a few categories: petty cash, inventory, payroll, and fraudulent bill or invoices. Internal controls and division of duty are the primary protections for a company, but these can be a challenge for entrepreneurs due to the size of the accounting department. Entrepreneur companies tend to have one person who is in charge of receiving and processing payments, making deposits, payroll, and reconciling all accounts. The risk can be great.

One step that can help provide some protection is the Simple Numbers accounting rhythm. The weekly reporting rhythm can help the owner have visibility into the money coming in and the money going out. The good news is that this reporting structure is easy to implement and easy to review. Each week your bookkeeper should send you at least the following data:

Amount of the bank account and the amount of the accounting software bank account

List of all bills by vendor along with the due date in a chart (including payroll)

List of all deposits made daily

Amount of A/R broken out into current, 30 days, 60 days, and 90 days

List of all expected payments to be received over the next two weeks

The above reports can be pasted into an email and should only take about 15 minutes each week to prepare. While these reports will not prevent all fraud, they will give accountability to the people responsible for accounting and provide insight to the entrepreneur on the normal business rhythm. For details and support on how to implement, check out our sample reports on www.SimpleNumbers.me.